TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 1440
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....or that in view of the facts and circumstances of the case, the Ld. CIT(A) was wholly wrong and unjustified in holding the assessment order u/s 143(3) dt. 31.12.2009 as legal and valid on the alleged ground that the notice u/s 143(2) dt. 02.09.2009 issued by ITO. Ward - 3(1), Kolkata, holding jurisdiction and access over the e-return filed for relevant A.Y 2007-08 was legal and valid. The decision of the Ld. CIT(A) was wholly unreasonable, uncalled for and bad in law as the ITO, Ward-3(1) had no legal jurisdiction vested with him to commence the assessment proceeding and complete it U/S 143(3) in this case by issue of a notice U/S 143(2) of the Act. 2. For that in view of the facts and circumstances of the case, the Ld. CIT(A) was wholly wrong and unjustified in holding the impugned order U/S 143(3) dt. 31.12.2009 passed by the LT.O, Ward - 56(4), Kol, as legal and valid, without considering the facts that the mandatory notice U/S 143(2) of the Act for the A.Y 2007-08 was never issued and served either by the said jurisdictional ITO prior to making the assessment or by the earlier A.O i.e. DCTT, CC-XI, Kol, at any time since filing of the return on 17.01.2009 till the jurisdictio....
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.... of Rs. 39,54,0001- suffered on sale of the said house property without considering the facts that as per the said old agreement dt. 06.01.1975 between the assessee and the erstwhile owner M/s Murray & Co. Pvt. Ltd., duly authenticated and registered by a Notary, the assessee firm became the deemed owner of the property u/s 2(47)(v) of the I.Tax Act and accordingly the gain 1 loss on sale of the property is assessable under the head " Capital Gain" in the hands of the assessee firm as the property was sold by the erstwhile owner for and on behalf of the assessee. The unlawful decisions of both the AO and the Ld. CIT(A) were wholly unreasonable, uncalled for and bad in law. 7. For that in view of the facts and circumstances of the case, the Ld. CIT(A) was wholly wrong and unjustified in confirming the disallowance of the Long Term Capital Loss of Rs. 16,12,812/- on sale of shares on the alleged grounds that it was a book loss generated through circular transactions among the Group concerns by passing adjustment entries in the books of a/c without considering the facts that instead of loss there was rather actual profit of Rs. 50.29 lakhs in those transactions which was converted....
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....th the ITO Ward-3(1) and therefore notice issued is not a valid notice. The copy of the notice issued under section 143(2) is placed on page 30 of the paper book and letter for challenging the notice is placed on page 31 of the paper book. Thereafter notice was issued u/s 142(1) of the Act dated 06.11.2009 by ITO Ward-56(4) having jurisdiction over the assessee which is placed on page 32-33 of the paper book. The assessee has also objected the legality of the notice issued under section 142(1) of the Act before the AO of ward 56(4) vide its letter dated 16-11-2009 which is placed on page 81 of the paper book on the ground that no valid notice u/s. 143(2) was issued by ITO Ward-56(4). However the assessment was completed by the ITO Ward-56(4) at total income of Rs. 14,63,85,655.00 after making certain addition/ disallowance. 6. Aggrieved, assessee preferred an appeal to ld. CIT(A) and raised objection on the validity of assessment proceedings. The Ld. CIT(A) in turn called for remand report from the AO which is placed on page 82 of the paper book and after considering the remand report Ld. CIT(A) has held as under:- "3.3.1 Since the return was filed electronically, the ITO, ard-3....
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....ions of section 143(2) of the Income-tax Act, 1961, which reads as under: "143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section(1) of section 142, the Assessing officer shall (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim; (Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003) (ii) notwithstanding anything contained in clause (1), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on....
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....ed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act." As apparent from above, the Assessing Officer in relation to an assessee means the AO, who is entrusted with the relevant jurisdiction as per the directions issued in this regard. There is no denying fact that the jurisdiction of the appellant was with DCIT, Central Circle till 06/04/2009. Return of income was filed on 17/01/2009 with Central Circle AO. Again, there is no denying the fact that the jurisdiction was transferred to ITO, Ward- 56(4), pursuant to the transfer order dated 06/04/2009. This is also a fact that both the AO's have never issued any notice u/s.143(2) within the prescribed period of six months from the end of the financial year in which the return was filed. In the present case, the ITO, Ward 3(1), having no jurisdiction over the appellant issued the notice u/s.l43(2). It is relevant to note here that the Hon'ble jurisdictional High Court in the case of Income-Tax Officer and Others v. Santosh Kumar Dalmia, [1994] 208 ITR 337 (Cal), has held that, "if the Income-tax Off....
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....ortunity of being heard to the assessee for completion of assessment under s. 143(3) or under s. 144. No such notice has been issued; therefore, for this reason also the assessment so completed by the ITO-(HQ) CIB, Pune, is null and void; therefore, liable to be quashed. 10. It is a matter of fact that the areas of jurisdiction of the AO are earmarked and as per area / earmarked, the assessees who belong to that area files their return with their respective ITOs. As no area has been earmarked to the ITO-(HQ) CIB, Pune, for completion of assessment, therefore, the ITO-(HQ) CIB, Pune, is not having jurisdiction to pass any assessment order. In view of these facts and circumstances, we hold that the order passed under s. 144 is bad in law and therefore, we quash the assessment. 11. Since we have allowed the legal issue in favour of the assessee, therefore, the issue on merit has become academic in nature which does not require any adjudication upon at this point of time. " Applying the above ratio, it is well established that the notice served as above is invalid and therefore, the assessment completed u/s.143(3) of the IT Act, is null and void and thus, liable to be quashed. In....
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....nvited to the decision of the Hon'ble Kolkata Tribunal in the , case of M/s. Nemchand Jain & Sons vs. DCIT, ITA No.1874/Kol/2012, [order copy enclosed at page nos. 60-65 of the P/B] wherein it was held that, "as the notice has been served beyond the specified period of twelve months, respectfully following the decision of the hon 'ble Gujarat High Court in the case of Maxima Systems Ltd. as also the decision of the Hon 'ble jurisdictional \ High Court of alcutta in the case of Amal Kumar Ghosh, the notice issued under section 143(2) 'Is held to be invalid and the consequential assessment also as invalid." 7.2 Apart from the above, it would not be out of place to mention here that even the provisions of section 292BB will not come to the rescue of the AO for failure to serve valid notice u/s 143(2) of the Act. In this context, it is of utmost importance to look into the provisions of section 292BB of the Income Tax Act, 1961 the bare language of which reads as under: "292BB. Notice deemed to be valid in certain circumstances> Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed....
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....d from asst. yr. 2008-09. 45. Summarising our findings, we hold as follows: (i) Sec. 292BB even if it is procedural it is creating a new disability as it precludes the assessee from taking a plea which could be taken as a right, cannot be construed retrospectively as the same is made applicable by the statute w.e.j. 1st April, 2008. (ii) Sec. 292BB is applicable to the asst. yr. 2008-09 and subsequent assessment years. " Again, even otherwise also, in view of the objection filed by the appellant before ITO, Ward- 56(4), vide letter dated 16/11/2009 [copy of which is enclosed at page no. 81 of the P/b], against issuing of notice u/s 142(1) without valid service of notice u/s 143(2), the aforementioned provision will have no application in the case of the appellant in terms of the Proviso to sec.292BB, as stated above. Perusal of the said letter reveals that the appellant had challenged the issue of notice u/s.142(1) without the issue of notice u/s.143(2) by the AO, ITO, Ward- 56(4), having jurisdiction over the appellant vide transfer order dated 06/04/2009. Therefore, the appellant having objected in course of assessment proceeding, the Proviso to sec.292BB gets attracted a....
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....a, till the point of transfer to ITO, Ward -56(4). Therefore, on what basis the AO claimed that previous jurisdiction of the appellant vested with ITO, Ward - 3(1), is known best to the AO himself, especially in view of the fact that no reply was given by ITO, Ward - 3(1) when the appellant at the very outset challenged the issue of notice u/s 143(2) by the AO, ITO, Ward - 3(1), vide letter dated 01/10/2009. Further, it is relevant to note here that CASS, on which reliance has been placed by the AO in support of the issue of notice u/s.l43(2), has not been authorized under any provisions of the Income Tax Act to determine the jurisdiction in respect of any assessee nor it has been authorized under the IT Act to direct anybody, other than the AO having proper jurisdiction, to issue notice u/s.l43(2). Besides, at this juncture, attention is invited to the fact that as per jurisdiction manual, copy of relevant pages of which is enclosed at page nos. 91-94 of the P/b, jurisdiction of ITO, Ward - 3(1) vested with corporate assesses only, whereas it is a clear fact that the appellant is a partnership firm and not a body corporate. Therefore, even otherwise also, ITO, Ward - 3(1) can have....
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....d to cross-examine those dealers and what extraction the appellant wanted from them." 7.4 Finally, when the Ld.CIT itself in his appellate order dated 07/0912011 has acknowledged the fact that at the time of filing of return, the DCIT, CC-XI, Kolkata, was the jurisdictional Assessing Officer and that subsequent to the transfer order passed u/s.127 of the Act by the Ld.CIT, Central-I, Kolkata, on 06/04/2009, the jurisdiction of the appellant was transferred to ITO, Ward - 56(4), there remains no iota of doubt that indeed ITO, Ward - 3(1) was not the previous AO of the appellant, as claimed by the Department. Relevant portion of the order, copy of which is enclosed at page nos. 102-128 of the P/b, is reproduced hereunder: "It appears from the record that the appellant firm had filed its return belatedly u/s.139(4) of the Act, on 1710112009. The return was filed electronically with digital signature. At the time of filing return, the DCIT, Central Circle- XI, Kolkata was the jurisdictional Assessing Officer. Subsequently, the Ld.CIT, Central-I, Kolkata passed an order uls.127 of the Act on 0610412009, transferring the jurisdiction of the appellant to ITO, Ward- 56(4), Kolkata." ....
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....he year under consideration. Thereafter the case was transferred to ITO Ward 56(4) by the order of Commissioner of Income Tax passed u/s 127 of the Act. However for the year under consideration a notice under section 143(2) of the Act was issued by the ITO of ward 3(1) for scrutiny assessment. The assessee challenged the validity of the notice on the ground that the jurisdiction on the assessee vests with the ITO of ward 56(4). On bringing this anomaly to the notice of the income tax authorities, the lower authorities rejected the same and framed the assessment u/s 143(3) of the Act by observing that the e-return was filed and the case was selected for selected on the basis of CASS system. Now the question before us arises so as to whether the non-issue of notice under section 143(2) of the Act by the competent authority shall make the assessment invalid. At this juncture, we want to produce the relevant portion 143(2) of the Act. "[Assessment 143.[(1)..... [(2).Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall,- (i) where he has reason to believe that any claim of loss, exempt....
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....passed without compliance with mandatory requirement of notice being issued by AO to assessee u/s 143(2). In support of the above, reliance is placed on the judgments of Hon'ble Supreme Court in the case of ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC) in the said case, the Hon'ble Supreme Court observed as under (page 369) "Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with." Further the Hon'ble Allahabad High Court in the case of CIT And Another vs. Mukesh Kumar Agrawal (2012) 345 ITR 29 (All), in this case, the Hon'ble Allahabad High Court held as under : "The Tribunal returned the findings that the assessing authority did not have jurisdiction to proceed further and make assessment since notice under section 143(2) of the Income-tax Act, 1961, was admittedly not issued. On appeal contending that the Commissioner (Appeals) and the Tribunal decided the issue in favour of the assessee relying upon a judgment of the Hon'ble Supreme Court but that judgment was not applic....